Trumponomics: Inside the America First Plan to Revive Our Economy

Trumponomics

Inside the America First Plan to Revive Our Economy

Stephen Moore

and

Arthur B. Laffer

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Table of Contents

About the Authors

Copyright Page

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Foreword

by Lawrence Kudlow

America is open for business, and we are competitive once again.

—

Donald Trump

at Davos, 2018

When Donald Trump asked me to serve as the chairman of his National Economic Council in March 2018, it was truly the honor of a lifetime. I joked with the president that I had worked for Ronald Reagan in the early 1980s on his economic revolution, and my mission in life is to serve the president roughly every 35 years.

I don’t agree with President Trump on every issue—and he knows that—but on the big picture of unleashing a new era of broad-based prosperity for America, we are in 100 percent agreement. Trump says we can get to 3, 4, or even 5 percent growth through tax reduction, deregulation, American energy production, and fairer trade deals, and he is exactly right. We are devoting nearly every working hour at the White House to achieving a sustained higher growth path that will create higher take-home pay for all Americans. And by the way, I can tell you after a few months on the job, this man is indefatigable. Donald Trump doesn’t stop. He barely sleeps. It’s almost impossible to keep up with him. He is truly obsessed with restoring American greatness.

Now, step back a minute. When Donald Trump first announced his run for the presidency three years ago, I, like Arthur and Steve and most people, was filled with skepticism. I wondered whether this was a publicity stunt, not a real bid to sit in the Oval Office. On some of his calls for trade tariffs, I was openly critical.

But when Arthur Laffer, Steve Moore, and I sat down with this billionaire businessman turned politician in Trump Tower in the spring of 2016, the three of us saw Trump in a whole new light. Here was a pro-growth, pro-business candidate who understood the vast underperformance of the U.S. economy and, even more importantly, the potential for dramatically faster growth. He wanted tax cuts. He wanted to deregulate, he wanted to get the government out of the way.

Most of all, we loved his Reaganesque optimism. It was infectious.

What a contrast with the left—which was full of negativity. We can’t grow faster than 2 percent. We can’t get wages up. We have to live with secular stagnation. We can’t rebuild our coal industry. Climate change is going to bring the end of civilization. The inner cities cannot be hopeful and prosperous places again. And, of course, Trump can’t possibly win. Well, he proved them all wrong! And he’s still doing that.

Arthur, Steve, and I spent much of the next six months on the campaign trail perfecting and then selling the Trump tax plan. Then when he was elected, we worked with the White House and Congress on the strategy to get it passed and signed into law. Arthur was the intellectual godfather of this amazing tax plan. Steve and I worked together doing the blocking and tackling to help the president get this over the goal line. It was a rocky road for sure. You will learn in this book, however, that Trump was an easy sell. He has an amazingly instinctive appreciation of which policy dials in Washington need to be twisted in another direction so that the economy can flourish. He always told us that the tax plan had to help the middle class—and that was always the mission. Our goal was to pass a tax cut that would help American businesses expand and invest and thereby hire more workers and boost their wages and salaries. It had been 17 years since the middle class had seen a rise in their incomes, and it was about time they got a raise.

I agree wholeheartedly with Arthur and Steve that the tax plan—along with other Trump initiatives—has supercharged the economy. As we used to tell Trump: it worked for Reagan, it worked for JFK, it will work for you. The tax plan, mixed with other pro-growth policies, has worked better and faster than we ever expected. As Trump has often said of the current American economic expansion: The world is witnessing the resurgence of a strong and prosperous America. There has never been a better time to hire, to build, to invest, and to grow in the United States.

He’s right. And what a salesman.

Trump’s policies, in just one and a half years, have begun to restructure the American economy. We’ve moved from secular stagnation (i.e., high taxes, massive regulation, huge government spending, and a disdain for business and investors) to a new private-sector incentive system that rewards success.

By slashing individual and corporate tax rates, providing 100 percent immediate expensing for plants and technology, and making it easy for big companies that fled our high-tax system to bring the money back home, he has ended the war against business and investment.

And it has happened faster than anyone imagined possible.

More than 250 American companies have announced gigantic investment projects, paid sizable bonuses to their workforces, increased 401(k) contributions, and raised corporate minimum wages and other benefits. As of May 2018, the stock market gains had increased Americans’ net wealth by an astounding $7 trillion. This is the only realistic chance of bailing out excessive government-union pensions and benefits—even though these very unions totally opposed Trump’s corporate tax reform.

Ankle-biting Democrats say, Rising business profits will go to shareholder buybacks. It isn’t bad for the 100 million Americans who own stock in companies like Apple and FedEx. Meanwhile, new money is circulating throughout the economy to start new companies and reoxygenate the system.

Walmart—which had bitterly fought attempts to raise the federal minimum wage—raised its internal minimum wage for virtually all its wage earners, gave bonuses of up to $1,000, expanded maternity and parental leave, and committed $5,000 to every employee who adopts a child. Costco quickly followed suit with its own policy.

And don’t forget the president’s argument about the importance of regulatory reduction. Regulation is stealth taxation, Trump has often said. We are freeing our businesses and workers so they can thrive and flourish as never before. Hold that thought, Mr. President. Oh, and don’t forget that the Trump tax bill ended the Obamacare individual mandate and opened the door to energy drilling in the Arctic National Wildlife Refuge (ANWR).

Even on trade and globalization, Trump has told his international counterparts: "As president of the United States, I will always put America first, just like the leaders of other countries should put their countries first also. But America first does not mean America alone."

This book offers the first real, day-by-day tale of how Trumponomics came to be—how it all happened. What a journey. I know that because I worked right alongside Steve and Arthur every step of the way in 2016 and 2017. It was a mighty struggle, and we each have the lashes on our backs for joining with Trump to help him make America great again. We were for Trump before it was cool.

They are my brothers; and we are still brothers in arms. I pridefully and eagerly took the job working for Donald Trump because, as we all agree, there is still so much to do to make America great again. This book shows how.

Introduction

Donald Trump won the biggest upset in American presidential history by promising the American people a transformative change in U.S. economic policy after eight years of an economic rut under Barack Obama and eight years before that of George W. Bush. Trump won by focusing on jobs and the economy, but he didn’t adopt a conventional left or right economic agenda.

He brought to Washington, D.C., a new economic populism that mixed some conventional Republican ideas—tax cuts, deregulation, energy development, and returning more power to the states—with more traditional Democratic issues—trade protectionism and infrastructure spending. Trump embraced the populist issues of immigration reform and requiring Europeans to pay for more of their own defense.

We wrote this book to try to define the man and the ideas behind this new economic theory—Trumponomics—that has the whole world in suspense and discombobulated. Can it work? Will it work?

Trump’s election was a political black swan event. We have never seen anything remotely like this president in any of our lifetimes. His outside-the-box political strategy worked like a charm, bursting through the blue wall of industrial states like Michigan, Ohio, Pennsylvania, Wisconsin, and Iowa. His populist message resonated with working-class Americans in these blue-collar states and districts. He is promising to bring jobs, higher wages, and development back to these areas that were bypassed during the recovery and haven’t seen much economic gain in two decades.

Can he succeed? The left insists no. They say growth cannot get back to 3 percent and that Trumponomics will make things worse. They say that the factories that have left places like Flint, Michigan; York, Pennsylvania; and Toledo, Ohio, are gone for good. They say that the steel mills and coal mines aren’t coming back. Trump is betting his presidency that he can create an economic revival in industrial-state America. It’s a gutsy, risky strategy.

The two of us worked as economic advisors to Donald Trump in 2016. Steve traveled with him. We met with him and his political and economic teams regularly in the primaries and in the general election phase. We worked on his speeches and spent months representing him as surrogates for his campaign. We are currently members of the Trump Economic Advisory Council and meet with Trump periodically.

This book is not meant to be a celebration of Donald J. Trump or Trumponomics. We clearly have an admiration for President Trump and support most of his policy goals, or we would not have agreed to serve as his economic advisors. And we wouldn’t be helping him today if we thought he was deranged, dangerous, delusional, or unfit for office, as so many liberals seem to think he is.

At the same time, we have worked with governors, congressmen, senators, and presidents for decades, and there is one constant that we’ve discovered with nearly all of them. There is a good, a bad, and an ugly with politicians, and the goal is to help make sure that as often as possible, the good triumphs over the bad and ugly. So it is with Donald Trump. He can be brilliant, gracious, and insightful one moment and sophomoric, impulsive, and hurtful the next.

One of our favorite moments of the campaign was when we asked Trump if at an upcoming campaign rally outside Orlando, he could meet with a 16-year-old boy, John Michael, who a few months earlier had suffered from a horrific brain lock, which left him paralyzed and unable to speak. The boy had learned to communicate by typing out words on a computer by blinking his eyes. One of the first things he typed, and this is the God’s honest truth, was: Make America Great Again. When we told this story to Trump, he said he absolutely wanted to meet John Michael. He instructed his campaign advance team to make sure that everything was set up so that John Michael in his wheelchair could greet him when he arrived at the airport. When Trump walked down the steps of the plane, there was John Michael and his family waiting for him. Trump spent several minutes giving encouragement to this stricken boy and taking pictures with the family, as the crowd of thousands waited. The crowd started chanting, John Michael, John Michael . . . It was a tender moment that wasn’t caught on the TV cameras.

When we asked the deputy campaign manager why Trump hadn’t brought John Michael on stage, he whispered: Donald didn’t want to do this in front of the cameras. He didn’t want people to think that he was exploiting this tragedy for political gain. This is the side of Donald Trump that many people are unaware of.

Trump also thinks big—really big. When we would advise Trump that his tax cut, deregulation, and pro-America energy policies could get America back to 3 or 4 percent growth, Trump would interrupt us and say, I want 5 percent growth. This is a guy who shoots for the stars, and why not? When John F. Kennedy said he was going to put a man on the moon before the end of the decade, many scoffed and said it was technically impossible and fiscally unaffordable. Trump faces this same criticism from growth skeptics every day.

Donald Trump is not an ideological conservative. Reagan was far more schooled in conservative thought and was more dedicated to the principles of limited government. Trump is for common sense. He is an economic populist in many ways—he believes in addressing the plight of ordinary people. His business mindset was one of his greatest attractions as a candidate against a GOP field of 16 mostly career politicians, and is a great attribute as a president. With Trump, it is all about results.

In this book we define what Trumponomics is and describe how and why Trump has adopted the policies that he has. For the most part, we reserve judgment as to how well these policies will work. The verdict on that will come in the next few years depending on how the economy performs. We like the direction of things and are cautiously optimistic that America could be in for a good run of prosperity.

* * *

Originally this book was conceived by Steve, Arthur, and our longtime partner, Larry Kudlow. The three of us worked together as a team during the campaign in 2016 and then as outside economic advisors to the president on the tax bill and other financial and economic issues. We got almost halfway into the writing when an important event happened that changed everything. President Trump tapped Larry to be the head of his National Economic Council. Overnight Larry became, arguably, the most important economist in the world. When President Trump called Arthur on a weekend in April 2018, asking if he should choose Larry for the job, Arthur replied: Sir, there is no better choice that you could make.

So we lost our coauthor, but the president got one of the best economists in the world to lead his team.

But Larry is almost a silent partner here. Readers will see that Larry was the major contributor in many of the meetings and strategy discussions with Trump and other key players in this story. We quote him liberally throughout and simply refer to him as Larry. Of course, he is not responsible for any of the text or any commentary about Trump or others. Those views are our own.

1

Meeting Trump

In early March 2016 the three of us (Arthur, Larry, and Steve) got urgent calls from our longtime friend Corey Lewandowski. Corey was a political activist and organizer extraordinaire, who had worked as the state director in New Hampshire for Americans for Prosperity, a major national taxpayer organizing group.

Corey had been tapped to be the campaign manager for the upstart, long-shot Donald Trump for president campaign. His message for us would change our lives. Donald Trump would like to meet the three of you, Corey explained. Could you meet him at four p.m. next Tuesday at his office in Trump Tower in Manhattan?

Wow. That was unexpected. When Trump had announced his run for the White House—about six months before—we, like most people, thought it was mostly a publicity stunt. Trump was saying some headline-grabbing things, throwing out a blizzard of populist policy ideas for the American people to chew over: Build the wall. Repeal NAFTA. The biggest tax cut ever. Meanwhile he was drawing massive, excited crowds at his political rallies across the country.

Donald Trump, although politically inexperienced and disdained by the Mediocracy and the professional political class, was somehow connecting with millions of voters. Rival candidates (perhaps with the exception of Bernie Sanders) were in denial and ignoring the signs of voter unrest at their own political peril.

We were initially anything but devoted fans. He was part of the New York City scene and had never taken on a significant role in the conservative free market movement. Trump’s statements seemed to us to be all over the map, a pastiche of conservative and progressive ideas. True, we were iconoclasts ourselves, and some of our own ideas—our advocacy of a more open legal immigration policy and our confidence that economic growth could balance the budget—were considered borderline heretical by some factions of the conservative coalition to which we belonged.

All three of us had written columns and research papers that had been critical of several of Trump’s positions, especially on trade. We were and are staunch free traders. Larry and Arthur had met Trump on many occasions in the past and liked him very much personally. Steve had never met Trump and was somewhat turned off by his brash, media-hogging style.

But all three of us were intrigued by the grassroots political movement that we now know as Trumpism, which was building throughout the country. And we liked what he was saying about chopping tax rates and restoring American greatness. We had openly supported his big ideas on changing the IRS tax code. Trump (and Corey) had taken notice of our public praise.

In several early major primary events, Trump had called out Larry by name. Larry Kudlow loves my tax plan, Trump had thundered several times in debates and rallies. Larry, on CNBC, was one of the first economic analysts to give Trump credit for some bold reform initiatives on taxes and rolling back unnecessarily burdensome government regulations. Similarly, Trump had gloated to conservative audiences: I got my tax ideas from the great Reagan economist Arthur Laffer.

We also loved Trump’s unyielding optimism about America’s potential for much faster economic growth, which would pull us out of the slow-growth ditch the nation had careened into during George W. Bush’s last years in office and Barack Obama’s entire presidency.

Trump was proclaiming that we could get to 5 percent growth with the right set of pro-business policy ideas. Though we thought that 5 percent was overly optimistic (we thought 3 to 4 percent was definitely doable), we loved the aspiration! We recognized that Trump, as a real estate developer who built skyscrapers and five-star resorts, thinks very big and does not shy away from dramatic license. The October 6, 2016, issue of The New Yorker (in an obvious attempted character assassination just before the election) reported Trump saying to [architect Der] Scutt, ahead of a 1980 press conference, Give them the old Trump bull[s*&%]. Tell them it is going to be a million square feet, sixty-eight stories . . .¹

We certainly agreed—wholeheartedly—that the economy could grow much, much faster than most economists believed. The standard trope on the left at the time was that 1 to 2 percent growth was the best America could achieve.² After all, if the left’s political messiah, Barack Obama, couldn’t get the economy moving faster, how could a mere mortal like Donald Trump presume to?

We were ecstatic that finally someone was frontally assaulting the tyranny of low expectations that sold America short. And we loved that Trump seemed to relish that the professional political class ridiculed his Make America Great Again (MAGA) theme. We did not agree with all Trump’s policy prescriptions. That said, he certainly had all the right enemies attacking him.

So, yes, we told Corey, we definitely wanted to meet with candidate Donald Trump.

Trump Tower

A few days later we arrived at Trump Tower in New York City and sifted through the massive security detail and what seemed like a tsunami of media cameras in the lobby, heading up to the twenty-sixth floor . . . and Donald Trump’s personal office.

One thing especially impressed us immediately: everyone around him seemed to love Donald Trump. Trump treats his people well.

It wasn’t an act. The Trump team displayed genuine affection for him, affection clearly mirroring his for them. You can tell a lot about a person from how he treats those who work for and with him every day. The vibe of deep mutual respect and obvious affection was telling.

We encountered no arrogance or stiffness. Team Trump was uniformly made up of polite and sweet people, all instantly likable, including our now good friend Rhona Graff, Trump’s longtime personal aide and one of his greatest assets.

Donald Trump, also, was punctual.

Our meeting was scheduled for four p.m. At 4:05, Donald Trump came bounding out of his inner office and pumped our hands up and down with an affectionate handshake and a charming smile. While at the Wall Street Journal, Steve Moore had once interviewed the famous college basketball announcer Dick Vitale—the live-wire personality with boundless energy and enthusiasm about everything. Trump seemed to Steve to be a political version of Vitale. We were a bit humbled by this warmth.

We immediately felt at ease as Trump ushered us into his office and excitedly showed us around. Trump’s office is like a museum filled with sports and entertainment memorabilia. He shared with us footballs and photos with (and many signed by) George Steinbrenner, Joe Namath, and other sports legends. The wall was also covered with dozens of framed magazine covers—from GQ to Esquire to New York magazine and on and on—featuring Donald J. Trump. The man loves his celebrity status—and no one has ever played the media better, as we would soon discover.

There were just us and Donald Trump in his office. He included no aides, no handlers, no self-important people tapping on tablets. He wanted to take photos and sign books, and it was all very engaging. We were surprised that, though he was arguably the busiest person in America at that moment, he acted as though he had all the time in the world for us.

Then our host sat down behind his giant desk and hunched toward us—in his signature style. He began to pepper us with questions about the economy and what we thought of his campaign. How am I doing? he asked, as he always did throughout the campaign. He proved inquisitive about everything. What do you think of my tax plan? "Is the economy headed